image source : reuters
Before we start talking about FinTech, let’s look at how well-entrenched the word has already become. As per KMPG's reckoning, in Q1’17 alone, global investment in FinTech companies has touched about 260 deals. VC (Venture Capital) investment for Q1’17 too was around $2.3 billion and at the same time PE (Private Equity) deals activity and investment rose considerably. We can also go back to an Accenture’s report that noted a steep rise in investment in FinTech around the world - from $930 million in 2008 to over $12 billion by early 2015. So it’s not new and it’s not nascent.
Why is all this money flocking towards FinTech?
What is it about Blockchains, Analytics, Digital Payments, Money Transfer models, aggregation platforms, Cryptocurrencies, Crowdfunding etc. that is making them poster boys for modern financial world?
Simple – they make everything faster, better, smarter and yes, most importantly, much less opaque and complex than what we dealt with in pre-FinTech days.
Technology used to reside mostly on the back-end side of a BFSI (Banking and Financial Service Institution) entity. But today, it has moved much ahead and closer to the customer. It all started with Iris scans, new forms of authentication, encryption, contact centres, EMV, new payment interfaces etc. but look where we are today – most leading and innovative banks around us are already making Chat-bots talk to us and sort our problems.
Indian banks have also started embracing AI (Artificial Intelligence) in advanced ways and the use of something as radical as Blockchains is affirmation enough that FinTech is here, and is here to stay.
What is the most eye-catching part here is the influx of transparency that these technologies are triggering. The completely-redefined element of trust and integrity that concepts like Bitcoins and Blockchains are bringing in is really a huge factor in filling some gaps that this industry was struggling with.
A new Data Structure or Digital Ledger like Blockchain, for instance, allows entities and companies to come on a network at the same level to make and verify transactions without a central authority, and at the click of a finger.
What these tools and breakthroughs are doing is simply bridging the gap between customer and what s/he really wants, at the exact second and without any trouble or red-tapism. The ‘Tech’ is allowing the ‘Fin’ to make the whole space as easy, seamless, delightful, rewarding, swift and invisible as possible so that the customer can really enjoy the ‘fin’ part.
On one hand; ledgers, capital sourcing, back-end systems are being equipped with better tools by FinTech, and on the other hand; customer experience is being completely reinvented thanks to new technologies and demands of the digitally-native-user generation. We can see even insurance as a field being made better with technology. There is peer-to-peer (P2P) insurance, community-based insurance, health insurance, life insurance being driven by faster tools and Software as a Service (SaaS) models. IoT is also making its mark gradually in many areas. Technology can be seen reshaping regulatory areas too and we can see RegTech increasingly penetrate this space in the coming years.
This should explain why as per an annual FinTech Report, we might be witnessing global cumulative investment surpassing $150 billion in 2017.
FinTech in the days of our grandparents could be something as simple as an automated-teller-machine that counted currency notes without human fingers. But today the lines between ‘fin’ and ‘tech’ have gotten so blurred that ‘tech’ in itself can create new ‘fin’ models – whether we look at cryptocurrency markets, AI driven Analytics-platforms and Exchanges, Digital Lending or we look at Telcos jumping in to cater to P2P payment segments.Robots, algorithms and software models are going to shape our financial lives in many more ways ahead. It’s time to enjoy new levels of speed, convenience, proactive services and customization that FinTech is bringing forth.